TransAlta Corp. Q3 FY2026 earnings call

• Financial & Operational Strength: Delivered strong operational and financial performance despite challenging market conditions, with average fleet availability at 92.6%. Remained confident in achieving full-year 2026 guidance.
• Strategic Acquisitions & Divestitures: Closed the acquisition of two natural gas peaking facilities in Colorado for US$1 billion, adding 318 MW and ~$110 million in annual adjusted EBITDA. Sold a 49% interest in the Oklahoma wind portfolio to Ares Infrastructure for US$305 million, monetizing non-core geography while retaining control.
• Alberta Portfolio Optimization: Mothballed Battle River units and extended Sundance 6 outage to preserve long-term optionality and optimize near-term costs. Retained flexibility to return these assets to service as data center load develops. Remaining fleet operates at higher capacity factors to support hedging and reliability.
• Data Center Strategy (Boreal Technology Hub): Progress continues on the Key Hills project (now Boreal Technology Hub) with partners Brookfield, CPP Investments, and BGRE. Received AUC approval for Keey Hills 1. The project aims for up to 1.6 GW of electrical load, utilizing underutilized gas-fired steam fleet and grid allocations. Community open house held successfully with no significant opposition.
• Regulatory Compliance: Complying with DOE Section 202 orders requiring Centurion Unit 2 to remain available for an additional 90 days. Expecting to recover associated costs.
• Centralia Conversion: Advancing conversion of Centralia to natural gas, expecting environmental permits by year-end and a final investment decision next year.
• Safety & People: Prioritizing safety performance indicators and maintaining a skilled workforce dedicated to reliable power generation.

TransAlta reported adjusted EBITDA of $264 million and free cash flow of $93 million ($0.29 per share). Specific segment highlights include:

• Hydro: Adjusted EBITDA benefited from optimized hedge positions and higher intercompany sales of emissions credits.
• Wind and Solar: Increased adjusted EBITDA driven by higher wind resources across all regions.
• Gas: Adjusted EBITDA was $29 million higher year-over-year, supported by strong optimization of the Alberta fleet, realization of emissions credits, and positive contributions from eastern Canada facilities.
• Energy Marketing: Performance improved by $13 million year-over-year due to strong trading desk results in U.S. power and natural gas markets.
• Corporate: Costs were controlled, coming in 20% lower than the prior year.
• Energy Transition: Reflects the cessation of coal-fired generation at Centralia at the end of 2025; renewable assets provided environmental offsets resulting in a $51 million reduction in carbon compliance obligations.

• 2026 Guidance Reaffirmed: Management reaffirmed confidence in achieving the 2026 guidance range for adjusted EBITDA and free cash flow, citing strong year-to-date performance and expectations.
• Capital Expenditures: Sustaining capital expenditures are within the guided range of $140–$160 million. Year-to-date sustaining capex is down $22 million, but higher maintenance capex is expected in Q4.
• Hedge Position: Maintaining a strong hedge book with approximately 2,100 GWh hedged for the remainder of 2026 at an average price of $67/MWh, and ~6,700 GWh hedged for 2027 at $65/MWh, both significantly above current forward pricing levels.

• Market Price Volatility: Alberta spot prices averaged $36/MWh in Q3 2026, down from $51/MWh in Q3 2025, due to strong supply and mild weather. However, management mitigated this through active hedging and dispatch optimization.
• Regulatory & Policy Changes: Dependence on regulatory outcomes, such as DOE Section 202 orders and ASO decisions regarding underutilized generation for data centers. Any changes in policy or failure to secure necessary permits could impact timelines and profitability.
• Operational Availability: While fleet availability remained high at 92.6%, reliance on mothballed units for future growth introduces execution risk if market fundamentals do not strengthen as anticipated.
• Construction & Permitting Risks: Delays in receiving environmental permits for the Centralia conversion or master site development permits for the Boreal Data Center could delay revenue generation and investment returns.

Q: Why mothball Battle River units now given soft pricing, and what drives their return? / A: It is an economic decision to preserve long-term optionality as low capacity factors make operation uneconomic currently. Units will return when data center load increases, underpinned by long-term contracts. They retain flexibility to flex up to >90% capacity factor with minimal capital, and 45 employees remain on-site to keep assets ready.

Q: Has the Boreal MOU scope increased to 1.6 GW, and when will definitive agreements be signed? / A: The scope expanded to 1.6 GW following June government regulations recognizing underutilized generation for data centers. Definitive agreements are likely delayed until early 2027, pending clarity from the ASO on the exact amount of underutilized generation that can be offered to customers beyond Phase 1.

Q: How does TransAlta view the competitive landscape for data centers amid US moratoriums? / A: There is a positive shift in customer tone toward Alberta due to moratoriums in Texas, Pennsylvania, and New York. Alberta offers speed to power, strong policy support, and reliability without compromising affordability. This creates a unique opportunity to attract demand that cannot be met elsewhere in North America.

Q: What is the outlook for repowering projects like Heartland/Battle River post-acquisition? / A: Initial thesis did not anticipate immediate data center load, focusing instead on long-term repowering. However, the acquisition now provides valuable optionality. These sites have critical infrastructure (gas, water, transmission) and industrial land status, making them ideal for future data center integration or repowering in the next decade.

Q: How is asset recycling strategy evolving after the Oklahoma sale? / A: Asset recycling is key to strengthening the balance sheet. Following the successful Oklahoma transaction, the team is identifying other non-core assets for monetization. They aim to be patient and thoughtful to ensure fair value, with several smaller opportunities already being advanced to bring in proceeds.